C-709/22 Syndyk Masy Upadłości A

JUDGMENT OF THE COURT (Seventh Chamber)

12 September 2024 ( *1 )

(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Articles 273 and 395 – Implementing Decision (EU) 2019/310 – Fight against VAT fraud – Split payment mechanism – VAT account of an insolvent taxable person – Transfer at the request of the insolvency administrator of funds deposited on the VAT account)

In Case C‑709/22,

REQUEST for a preliminary ruling under Article 267 TFEU from the Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative Court, Wrocław, Poland), made by decision of 22 September 2022, received at the Court on 17 November 2022, in the proceedings

Syndyk Masy Upadłości A

v

Dyrektor Izby Administracji Skarbowej we Wrocławiu,

interested party:

Rzecznik Małych i Średnich Przedsiębiorców,

THE COURT (Seventh Chamber),

composed of N. Wahl, acting as President of the Chamber, J. Passer and M.L. Arastey Sahún (Rapporteur), Judges,

Advocate General: J. Kokott,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

the Dyrektor Izby Administracji Skarbowej we Wrocławiu, by K. Tudrujek,

the Rzecznik Małych i Średnich Przedsiębiorców, by P. Chrupek, radca prawny,

the Polish Government, by B. Majczyna, acting as Agent,

the European Commission, by M. Herold, K. Herrmann and J. Jokubauskaitė, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 11 April 2024,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), Council Implementing Decision (EU) 2019/310 of 18 February 2019 authorising Poland to introduce a special measure derogating from Article 226 of Directive 2006/112 on the common system of value added tax (OJ 2019 L 51, p. 19), Article 17(1), Article 41(1), Article 51(1) and Article 52(1) of the Charter of Fundamental Rights of the European Union (‘the Charter’), Article 2 and Article 4(3) TEU, and the principles of proportionality, neutrality of value added tax (VAT) and legal certainty.

2The request has been made in proceedings between Syndyk Masy Upadłości A (court-appointed administrator in the insolvency of A; ‘insolvency administrator A’) and the Dyrektor Izby Administracji Skarbowej we Wrocławiu (Director of the Tax Administration Chamber in Wrocław, Poland) (‘the Director of the Tax Authority’) concerning the latter’s decision not to release funds deposited on the VAT account of a taxable person subject to insolvency proceedings.

Legal context

European Union law

Directive 2006/112

3Article 206 of Directive 2006/112 provides:

‘Any taxable person liable for payment of VAT must pay the net amount of the VAT when submitting the VAT return provided for in Article 250. Member States may, however, set a different date for payment of that amount or may require interim payments to be made.’

4Article 226 of that directive provides:

‘Without prejudice to the particular provisions laid down in this Directive, only the following details are required for VAT purposes on invoices issued pursuant to Articles 220 and 221:

…’

5Article 273 of that directive provides:

‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.

The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.’

6Article 395(1) of that directive is worded as follows:

‘The Council [of the European Union], acting unanimously on a proposal from the [European] Commission, may authorise any Member State to introduce special measures for derogation from the provisions of this Directive, in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance.

Measures intended to simplify the procedure for collecting VAT may not, except to a negligible extent, affect the overall amount of the tax revenue of the Member State collected at the stage of final consumption.’

Regulation (EU) 2015/848

7Under the first subparagraph of Article 1(1) of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (OJ 2015 L 141, p. 19):

‘This Regulation shall apply to public collective proceedings, including interim proceedings, which are based on laws relating to insolvency and in which, for the purpose of rescue, adjustment of debt, reorganisation or liquidation:

a debtor is totally or partially divested of its assets and an insolvency practitioner is appointed;

the assets and affairs of a debtor are subject to control or supervision by a court; or

a temporary stay of individual enforcement proceedings is granted by a court or by operation of law, in order to allow for negotiations between the debtor and its creditors, provided that the proceedings in which the stay is granted provide for suitable measures to protect the general body of creditors, and, where no agreement is reached, are preliminary to one of the proceedings referred to in point (a) or (b).’

Implementing Decision (EU) 2019/310

8Implementing Decision 2019/310 was adopted, as is apparent from its cited legal base, on the basis of the FEU Treaty and Directive 2006/112 and, in particular, Article 395(1) thereof.

9Recitals 1, 3, 4, 7, 9, 11 and 12 of Implementing Decision 2019/310 state:

By letter registered with the Commission on 15 May 2018 Poland requested an authorisation to introduce a special measure derogating from Article 226 of Directive [2006/112] in order to apply a split payment mechanism (“the special measure”). The special measure should require the inclusion of a special statement that [VAT] has to be paid to the blocked VAT account of the supplier on invoices issued in relation to the supplies of goods and services susceptible to fraud and generally covered by the reverse charge mechanism and by the joint and several liability in Poland. …

…

Poland has already taken numerous measures to fight fraud. It has introduced, the reverse charge mechanism and joint and several liability of the supplier and the customer, the Standard Audit File, tighter rules for the VAT registration and de-registration of taxable persons, increased number of audits among others. However, Poland nonetheless considers that those measures are insufficient to prevent VAT fraud.

Poland is of the view that the application of the special measure will eliminate VAT fraud. Since under the split payment mechanism the amount of VAT deposited on a separate VAT account of a supplier (taxable person) can be used for restricted purposes only, namely for the payment of the VAT liability to the tax authority or for the payment of VAT on invoices received from suppliers, it is better guaranteed that the tax authorities will receive the whole VAT amount which should be transferred by the taxable person to the Polish State Treasury.

…

Where a surplus of input tax in excess of the output tax that is recognised by the supplier in the VAT return as a refundable amount, the payment of such refund is normally carried out within 60 days to [the] supplier’s regular account. However, Poland has informed the Commission that, for the transactions covered by the special measure, at the request of a supplier who holds a blocked VAT account, the refund is to take place within 25 days.

…

The special measure is to apply to all suppliers, including those suppliers who are not established in Poland, as they have to hold a bank account operated pursuant to Polish Banking Law. In this respect, Poland confirmed that the suppliers will not incur any additional costs relating to the obligation of opening a bank account in Poland, since those suppliers will be able to open and hold the bank account for VAT payments in Poland free of charge.

…

The Commission is of the view that the special measure for supplies of goods and services susceptible to fraud is likely to bring effective results in the fight against VAT fraud. …

Given the novelty and the broad scope of the special measure, it is important to ensure necessary follow-up. In particular, such follow-up needs to focus on the impact of the special measure on the level of VAT fraud and on the taxable persons regarding the refunds of VAT, the administrative burden, costs for taxable persons among others. Poland should therefore provide a report on the impact of the special measure 18 months after the entry into force of the special measure in Poland.’

10Article 1 of that implementing decision provides:

‘By way of derogation from Article 226 of [Directive 2006/112], Poland is authorised to introduce a special statement that VAT shall be paid to the separate and blocked VAT bank account of the supplier opened in Poland on invoices issued in relation to supplies between taxable persons of goods and services listed in the Annex to this Decision where payments for supplies are made by electronic bank transfers.’

11Under the second paragraph of Article 3 thereof, that implementing decision was to apply from 1 March 2019 to 28 February 2022.

12Council Implementing Decision (EU) 2022/559 of 5 April 2022 amending Implementing Decision (EU) 2019/310 as regards the authorisation granted to Poland to continue to apply the special measure derogating from Article 226 of Directive 2006/112/EC on the common system of value added tax (OJ 2022 L 108, p. 51) extended the authorisation granted by Implementing Decision 2019/310 until 28 February 2025.

Polish law

The Law on VAT

13Article 106e(1)(18a) of the ustawa o podatku od towarów i usług (Law on the tax on goods and services) of 11 March 2004 (Dz. U. of 2021, item 685), as amended (‘the Law on VAT’), provides:

‘Invoices on which the total amount due exceeds 15000 [Polish zlotys (PLN)] or the equivalent of that amount in a foreign currency and which cover the supply to a taxable person of goods or services listed in Annex No 15 to that law, shall contain the statement “split payment mechanism” …’

14Article 108a of that law provides:

‘1. Taxable persons who have received an invoice showing the amount of tax may apply the split payment mechanism when paying the amount due arising from that invoice.

1a. When making payments for purchased goods or services listed in Annex No 15 to that law and evidenced by an invoice whose total amount due exceeds PLN 15000 or the equivalent of that amount in a foreign currency, taxable persons shall be required to apply the split payment mechanism. …

…

2. The split payment mechanism consists of:

paying the amount corresponding to all or part of the amount of the tax arising from the invoice received into the VAT account;

paying all or part of the amount corresponding to the net sales value arising from the invoice received into a bank account or a credit union account for which a VAT account is maintained, or by otherwise settling that invoice.’

15Article 108b of that law provides:

‘1. At the request of the taxable person, the Director of the Tax Office shall authorise, by decision, the transfer of the funds held in the VAT account indicated by the taxable person to the bank account or credit union account, indicated by the taxable person, for which account that VAT account is maintained.

…

3. The Director of the Tax Office shall issue a decision within 60 days of receipt of the request. …

…

5. The Director of the Tax Office shall refuse, by decision, the transfer of the funds held in the VAT account:

in the event of tax arrears on the part of the taxable person and payment arrears referred to in Article 62b(2)(2)(a) of the [ustawa – Prawo bankowe (Law on Banking), of 29 August 1997 [(Dz. U. of 1997, No 140, item 939), as amended; (‘the Law on Banking’)], where the amount of those funds corresponds to those arrears with late payment interest at the date of the decision;

when there are reasonable grounds for concern that

the tax liability relating to the taxes and liabilities referred to in Article 62b(2)(2)(a) of [the Law on Banking] will not be enforced, in particular where the taxpayer persistently refrains from paying the taxes due or takes measures consisting of the disposal of assets which may hinder or frustrate the fulfilment of tax obligations, or

arrears of taxes and liabilities referred to in Article 62b(2)(2)(a) of [the Law on Banking] arises, or an additional tax debt, is established.

…’

The Law on Banking

16Article 62b(2) of the Law on Banking, provides:

‘The VAT account may be debited only:

…

for the purposes of payment:

into the account of the Tax Office of:

[VAT], including [VAT] on imported goods, additional tax and late payment interest on [VAT] or on the additional tax,

corporation tax and the payment on account for that purpose, together with late payment interest on corporation tax or on the payment on account for that purpose,

personal income tax and advance payment for that purpose, together with late payment interest on personal income tax and on payment on account for that purpose,

excise duty, advance payment of excise duty, daily payments and late payment interest on excise duty and advance payment of excise duty,

customs duties and late payment interest thereon,

…’

The dispute in the main proceedings and the questions referred for a preliminary ruling

17On 28 June 2021, the insolvency administrator A applied to the Naczelnik Urzędu Skarbowego w O. (Director of the Tax Office, O., Poland) to transfer the funds held in the VAT account of an insolvent taxable person to the account of the insolvency estate. As grounds for the insolvency administrator A’s application, the insolvency administrator A stated that the sum of 104915 PLN (approximately EUR 23600) was to be transferred to the account of the municipality of O. (Poland) in order to pay the property tax, payable by that taxable person in respect of July 2021.

18By decision of 26 August 2021, the Director of the Tax Office in O. rejected that application.

19The Director of the Tax Authority, hearing an appeal brought by the insolvency administrator A against that decision, confirmed that decision by decision of 30 November 2021.

20The insolvency administrator A brought an action against the latter decision before the Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative Court, Wrocław, Poland), which is the referring court.

21The referring court notes that the Polish legislation and, more specifically, Article 106e(1) and Articles 108a to 108f of the Law on VAT, and Articles 62a to 62e of the Law on Banking, provide for the split payment mechanism. That mechanism consists in separating the payment of VAT due from the taxable amount due. When a supplier of goods or services falls within the split payment provisions, that supplier is obliged to have, in addition to his or her regular bank account, a separate and blocked bank account for VAT purposes. That account is reserved for the collection of the VAT paid by its customers and the payment of VAT to its own suppliers as well as the payment of other public debts, but only those of the State Treasury. In that case, the customer pays the taxable amount to the supplier into an ordinary bank account, while the VAT due on the supply of goods or services is paid into the blocked bank account for the purposes of the VAT held by that supplier. That method of payment is merely the result of the payer’s willingness and is not automatic. The release of funds held in the VAT account of a taxable person requires the consent of the tax authority.

22The split payment mechanism was introduced by the Polish legislature in accordance with Implementing Decision 2019/310, by which the Council authorised the Republic of Poland to introduce, for the period from 1 March 2019 to 28 February 2022, a special measure derogating from Article 226 of Directive 2006/112.

23In that regard, the referring court observes that Implementing Decision 2019/310 contains rules different from those set out in Council Implementing Decision (EU) 2017/784 of 25 April 2017 authorising the Italian Republic to apply a special measure derogating from Articles 206 and 226 of Directive 2006/112 on the common system of value added tax and repealing Implementing Decision (EU) 2015/1401 (OJ 2017 L 118, p. 17).

24Unlike Implementing Decision 2019/310, Implementing Decision 2017/784 provides, by way of derogation from Article 206 of Directive 2006/112, the possibility of establishing a national system under which the payment of the VAT due on supplies of goods and services is made by the recipient to a separate and blocked bank account held by the Italian tax authority.

25The referring court asks whether a national measure laying down an obligation for the purchaser of goods or services to transfer the VAT due to the supplier of those goods or services to a separate and blocked bank account, held by that supplier, constitutes a derogation from Article 206 of Directive 2006/112 and, therefore, whether that measure needs to be notified, pursuant to Article 395 of that directive. A breach of the notification obligation constitutes a procedural defect and renders those regulations inapplicable and therefore unenforceable against individuals (see, to that effect, judgment of 4 February 2016, Ince, C‑336/14, EU:C:2016:72, paragraph 67).

26In the opinion of that court, in accordance with Article 206 of Directive 2006/112, the taxable person is liable to pay VAT not after each taxable transaction carried out by him, but at the end of each tax period. Accordingly, the net amount of VAT, referred to in the first sentence of that article, corresponds to the amount of VAT relating to all the taxable transactions carried out by the taxable person during the tax period, from which the VAT paid in respect of all the transactions carried out during that period is deducted, including those carried out before the transactions carried out by that taxable person. In those circumstances, that taxable person should be able to dispose freely of the earlier payments which he or she has received from his or her customers. In the case, however, of a VAT account such as that at issue in the case before that court, the funds are blocked before the VAT liability to the public authorities arises.

27It is true that Article 206 of Directive 2006/112 allows Member States to collect an interim payment of VAT. The term ‘interim payment’ means the partial payment of an amount that is payable later, namely the net amount of VAT calculated for a whole tax period. However, it would be difficult to regard the amount of VAT paid by the purchaser of goods or services to its supplier in respect of a specific transaction, as laid down by the Polish legislation providing for the split payment mechanism, as constituting an interim payment within the meaning of Article 206 of Directive 2006/112, in accordance with the case-law resulting from the judgment of 9 September 2021, Dyrektor Izby Administracji Skarbowej w Bydgoszczy (Intra-Community acquisitions of diesel) (C‑855/19, EU:C:2021:714, paragraph 33). Furthermore, the situation in the case before the referring court is different to that in the case which gave rise to the judgment of 26 March 2015, Macikowski (C‑499/13, EU:C:2015:201), in which a court enforcement officer was regarded as a third party who had paid output tax, and not as a supplier.

28The referring court has doubts as to whether the national measure at issue goes beyond the objective of fighting VAT fraud, which follows from Articles 273 and 395 of Directive 2006/112 and Implementing Decision 2019/310.

29In particular, it asks whether the obligation, for a taxable person, to obtain authorisation from the tax authority as regards the allocation of funds in that taxable person’s VAT account for purposes other than the payment of debts owed to the State Treasury, in particular to another public creditor such as a municipality, falls within the limits of the fight against VAT fraud.

30With regard to the situation of insolvent taxable persons, such as that in the case before the referring court, it would be all the more difficult to concede that the obligation laid down by the measure at issue is intended to combat VAT fraud given that the authorisation for the transfer of funds held in the VAT account was requested by an insolvency administrator subject to review by an insolvency court.

31In addition, the referring court asks whether, in the light of the fact that, in the present case, the insolvent taxable person does not carry out any economic activity, thus is not performing any transactions giving rise to VAT, and that insolvency administrator A stated that that taxable person had not, since the declaration of insolvency, had any outstanding VAT arrears, the blocking of funds in the VAT account infringes the principle of VAT neutrality.

32The referring court is also uncertain as to whether the split payment mechanism complies with the right to property guaranteed by Article 17 of the Charter.

33The Polish legislature did not regulate the effects of that mechanism in the context of the Law on Insolvency. In that situation, it is difficult to take the view that there are clear and precise rules enabling an insolvency administrator to conduct the insolvency procedure and foresee the conduct of the tax authorities.

34In accordance with Article 2 TEU, in a State governed by the rule of law, economic operators should legitimately be able to expect from public authorities that interference with their fundamental rights is subject to reasonable limits and does not take account only of the interests of the State Treasury.

35In those circumstances, the Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative Court, Wrocław) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

Must the provisions of [Implementing Decision 2019/310] [and] the provisions of [Directive 2006/112], in particular Articles 395 and 273 thereof, as well as the principle of proportionality and the principle of neutrality, be interpreted as precluding national legislation and practice which, in the circumstances of the case at hand, preclude the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism) to a bank account which has been designated by [that insolvency administrator]?

Must Article 17(1) of the [Charter] – [concerning the] right to property – in conjunction with Article 51(1) and Article 52(1) thereof, be interpreted as precluding national legislation and practice which, in the circumstances of the case at hand, by precluding the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism), consequently result in the funds owned by the insolvent taxable person in that VAT account being frozen, and thus make it impossible for [that] insolvency administrator to carry out his or her duties in the course of the insolvency proceedings?

Having regard to the context and objectives of [Implementing] Decision 2019/310, as well as the provisions of [Directive 2006/112], must the principle of the rule of law stemming from Article 2 [TEU] and the principle of legal certainty which implements it, the principle of sincere cooperation stemming from Article 4(3) TEU, and the principle of good administration stemming from Article 41(1) of the Charter, be interpreted as precluding national practice which, by precluding the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism), seeks to frustrate the objectives of the insolvency proceedings defined by an insolvency court as falling within Polish jurisdiction for the purposes of Article 3(1) of [Regulation 2015/848], and consequently leads to a situation as a result of which, through the application of an inappropriate national measure, the State Treasury is treated preferentially as a creditor at the expense of the general body of creditors?’

Consideration of the questions referred

The first question

36By its first question, the referring court asks, in essence, whether Articles 273 and 395 of Directive 2006/112, Implementing Decision 2019/310 and the principles of proportionality and neutrality of VAT must be interpreted as precluding national legislation which provides that the amount of VAT deposited on a separate VAT account, which a supplier has with a banking institution, may be used only for limited purposes, namely, in particular, the payment of the VAT due to the tax authority or the payment of the VAT on invoices received from suppliers of goods or services.

37In that regard, it should be borne in mind that Article 226 of Directive 2006/112 lists the details which are required for VAT purposes on invoices issued pursuant to that directive.

38Article 395(1) of that directive provides that the Council may authorise any Member State to introduce special measures for derogation from the provisions of that directive, in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance.

39It was pursuant to that latter provision and following a request to that effect by the Republic of Poland to the Commission that the Council adopted Implementing Decision 2019/310.

40In that regard, it is apparent from recital 1 of that implementing decision that that ‘special measure should require the inclusion of a special statement that [VAT] has to be paid to the blocked VAT account of the supplier on invoices issued in relation to the supplies of goods and services susceptible to fraud and [which are] generally covered by the reverse charge mechanism and by the joint and several liability in Poland’.

41As stated in the grounds of that implementing decision, the Commission was of the view that the special measure, concerning supplies of goods and services presenting a risk of fraud, is likely to bring effective results in the fight against VAT fraud.

42In those circumstances, in accordance with Article 1 of that implementing decision, by way of derogation from Article 226 of Directive 2006/112, the Republic of Poland was authorised to introduce a special statement that the VAT, in relation to the invoices issued for supplies between taxable persons of goods and services listed in the annex to that implementing decision, was to be paid into the separate and blocked VAT bank account of the supplier opened in Poland, where payments for those supplies are made by electronic bank transfers.

43Consequently, for the purpose of applying the split payment mechanism, the Polish legislature provided, in its national legislation, that invoices for the supply of goods or services covered by that legislation to the taxable person, the total amount due of which exceeds 15000 PLN (approximately EUR 3370) or its equivalent in another currency, must contain the statement ‘split payment mechanism’.

44In so far as that mechanism not only provides for the statement which must be included on the invoices but also establishes the scheme for the separate and blocked VAT account, under which an authorisation from the tax authority is required for the transfer of funds from that account, that authorisation being subject to conditions laid down by Polish legislation, the referring court asks whether the legislation providing for that mechanism goes beyond the authorisation granted to the Republic of Poland by Implementing Decision 2019/310. In particular, that court seeks to ascertain whether that legislation constitutes an unauthorised derogation from Article 206 of Directive 2006/112.

45In order to answer that question, it must be stated that no provision of that directive imposes specific obligations on Member States with regard to a split payment mechanism such as that at issue in the main proceedings.

46With regard to Article 206 of that directive, it must be borne in mind that it provides that any taxable person who is liable for the payment of VAT must pay the net amount of VAT when submitting the VAT return provided for in Article 250 of that directive, although Member States may set a different date for payment of that amount or may require interim payments to be made.

47In that regard, it is apparent from the documents before the Court that, where the funds corresponding to the amount of VAT are paid into the taxable person’s separate VAT account, no payment of a VAT debt to the State budget takes place, the VAT being payable only on specified dates after the end of the tax period.

48As the Advocate General noted in point 34 of her Opinion, although the taxable person cannot freely dispose of the funds held in a separate VAT account, the Polish legislation nevertheless provides for the possibility for that taxable person to use those funds in order to pay VAT to his or her suppliers of goods or services and to discharge his or her liabilities to the State.

49Consequently, as the Advocate General observed in point 35 of her Opinion, in so far as the taxable person may use the funds in the separate VAT account to pay VAT to his or her suppliers of goods or services, he or she is not required to pre-finance VAT to an extent greater than that provided for by the normal system of Directive 2006/112.

50In that regard, it should be added that, while, formally, Implementing Decision 2019/310 constitutes a derogation from Article 226 of Directive 2006/112, which concerns the statements which must be included, for VAT purposes, on invoices issued in accordance with that directive, the fact remains that, as stated in recitals 1, 4 and 7 of that implementing decision and Article 1 thereof, that derogation was provided for in order to allow the Polish legislature to establish a scheme to block funds in a separate bank account for VAT purposes. It follows that, in granting the derogation at issue, the EU legislature was informed that its introduction into Polish legislation entailed establishing that scheme of a separate account for VAT purposes.

51In those circumstances, the split payment mechanism cannot be regarded, as such, as being contrary to Article 206 of Directive 2006/112 and does not constitute a derogation from that article.

52As regards the principle of fiscal neutrality, relied on by the referring court in the first question, it must be borne in mind that, in accordance with settled case-law of the Court, that principle of fiscal neutrality was intended by the EU legislature to reflect, in matters relating to VAT, the general principle of equal treatment and precludes in particular treating economic operators carrying out the same transactions differently for VAT purposes (see, inter alia, judgments of 17 December 2020, WEG Tevesstraße, C‑449/19, EU:C:2020:1038, paragraph 48, and of 16 February 2023, DGRFP Cluj, C‑519/21, EU:C:2023:106, paragraph 88).

53The scheme laid down by Directive 2006/112 and the right of VAT deduction which is part of it are designed to relieve the trader entirely of the burden of the VAT due or paid in the course of all his or her economic activities. The common system of VAT consequently ensures that all economic activities, whatever their purpose or results, provided that they are themselves subject to VAT, are taxed in a wholly neutral way (see, to that effect, judgment of 16 February 2023, DGRFP Cluj, C‑519/21, EU:C:2023:106, paragraph 94 and the case-law cited).

54In the present case, the order for reference does not make it possible to identify any link between, on the one hand, the principle of fiscal neutrality and, on the other, the conditions, laid down by Polish legislation, to which the refusal to release funds from the VAT account of the insolvent taxable person is subject in the context of insolvency proceedings.

55As regards the principle of proportionality, also relied on by the referring court in the first question, suffice it to bear in mind that, in the first place, as is apparent from recital 3 of Implementing Decision 2019/310, although the Republic of Poland has already taken numerous measures to fight against VAT fraud, that Member State was of the view, however, that those measures were insufficient to prevent that fraud. As stated in recital 11 of that implementing decision, the Commission approved that analysis, taking the view that the special measure at issue for supplies of goods and services susceptible to fraud was likely to bring effective results in the fight against VAT fraud.

56In the second place, in so far as, in accordance with Article 1 of Implementing Decision 2019/310, the authorisation provided for by that decision applies only to payments made by means of electronic bank transfers, the obligation to include on the VAT invoice a statement that that tax is paid into a separate and blocked VAT account of the supplier and, therefore, to ensure that the corresponding sums are transferred to that account, must not be regarded as a binding requirement. Therefore, it is not disproportionate.

57In the third place, that obligation does not apply to all transactions giving rise to payment by electronic transfer, since, in accordance with Article 106e and Article 108a of the Law on VAT, it concerns only invoices for the supply of goods or services the total amount due of which exceeds 15000 PLN (approximately EUR 3370) or its equivalent expressed in foreign currency, which does not appear disproportionate either.

58In the fourth place, as has been stated in paragraph 48 above, the Polish legislation provides for the possibility for the taxable person to use the funds held in that separate VAT account in order to pay VAT to his or her suppliers of goods or services and to discharge his or her liabilities to the State. Therefore, that legislation does not provide for an absolute blocking of the funds at issue, but merely limits their use, which is also proportionate to the objective of fighting VAT fraud.

59In the light of all the foregoing considerations, the answer to the first question is that Articles 273 and 395 of Directive 2006/112 and Implementing Decision 2019/310 must be interpreted as not precluding national legislation which provides that the amount of VAT deposited on a separate VAT account, which a supplier has with a banking institution, may be used only for limited purposes, namely, in particular, the payment of the VAT due to the tax authority or the payment of VAT on invoices received from suppliers of goods or services.

The second question

60By its second question, the referring court asks, in essence, whether Article 17(1) of the Charter, read in conjunction with Article 51(1) and Article 52(1) thereof, must be interpreted as precluding national legislation which provides that the amount of VAT deposited on a separate VAT account, which a supplier has with a banking institution, may be used only for limited purposes, namely, in particular, the payment of the VAT due to the tax authority or the payment of the VAT on invoices received from suppliers of goods or services.

61In that regard, it should be recalled that, under Article 51(1) of the Charter, its provisions are addressed to the Member States only when they are implementing EU law.

62In accordance with settled case-law, the concept of ‘implementing Union law’, as referred to in Article 51 of the Charter, assumes a degree of connection between an EU legal measure and the national measure in question, above and beyond the matters covered being closely related or one of those matters having an indirect impact on the other (judgment of 16 July 2020, Adusbef and Others, C‑686/18, EU:C:2020:567, paragraph 52 and the case-law cited).

63In that respect, the Court has found that fundamental EU rights could not be applied in relation to national legislation because the provisions of EU law in the subject area concerned did not impose any specific obligation on Member States with regard to the situation at issue in the main proceedings (judgment of 16 July 2020, Adusbef and Others, C‑686/18, EU:C:2020:567, paragraph 53 and the case-law cited).

64In the present case, as is apparent from the answer given to the first question, none of the provisions of EU law referred to by the referring court imposes on Member States specific obligations with regard to a split payment mechanism such as that at issue in the main proceedings.

65In addition, it must be borne in mind that the dispute in the main proceedings concerns the refusal, by the tax authority, to authorise a transfer of funds held in the separate VAT account of an insolvent taxable person to the account of the insolvency estate for the purpose of paying municipal property tax. Before the referring court, the insolvency administrator A challenges the rule, imposed under the Polish legislation applicable in the present case, that it is not possible to transfer the funds held in the separate and blocked VAT account for the purpose of paying that property tax.

66In that regard, it must be held that, although the split payment mechanism for VAT, provided for by the Polish legislation at issue, has, as such, a certain link with the VAT system provided for by Directive 2006/112, the fact remains that the detailed rules for the payment of a municipal property tax by means of the funds held in a separate VAT account of the taxable person are not determined by the provisions of Directive 2006/112, with the result that that mechanism does not constitute an ‘implementation of Union law’ within the meaning of the case-law cited in paragraph 62 above.

67In those circumstances, the second question is inadmissible.

The third question

68By its third question, the referring court asks whether the principle of the rule of law stemming from Article 2 TEU, the principle of legal certainty, the principle of sincere cooperation stemming from Article 4(3) TEU and the principle of good administration stemming from Article 41(1) of the Charter must be interpreted as precluding national legislation which provides that the amount of VAT deposited on a separate VAT account, which a supplier has with a banking institution, may be used only for purposes limited to, namely, in particular, the payment of the VAT due to the tax authority or the payment of the VAT on invoices received from suppliers of goods or services.

69In accordance with settled case-law, the procedure provided for in Article 267 TFEU is an instrument of cooperation between the Court of Justice and the national courts, by means of which the Court provides the national courts with the points of interpretation of EU law which they need in order to decide the disputes before them (judgment of 1 August 2022, Vyriausioji tarnybinės etikos komisija, C‑184/20, EU:C:2022:601, paragraph 47).

70Since the order for reference serves as the basis for that procedure, it is essential that the national court should, in that decision, expand on its definition of the factual and legislative context of the dispute in the main proceedings and give the necessary explanation of the reasons for the choice of the provisions of EU law which it seeks to have interpreted and of the link it establishes between those provisions and the national law applicable to the proceedings pending before it (judgment of 8 June 2023, Lyoness Europe, C‑455/21, EU:C:2023:455, paragraph 26).

71In that regard, it should also be noted that the information provided in orders for reference must enable, first, the Court to provide useful answers to the questions referred by the national court and, secondly, the governments of the Member States and other interested parties to exercise the right conferred on them by Article 23 of the Statute of the Court of Justice of the European Union to submit observations. It is the Court’s duty to ensure that that right is safeguarded, given that, under that provision, only the orders for reference are notified to the interested parties (see, to that effect, judgment of 4 May 2023, MV – 98, C‑97/21, EU:C:2023:371, paragraph 30).

72Those cumulative requirements concerning the content of a request for a preliminary ruling are expressly set out in Article 94 of the Rules of Procedure of the Court of Justice, which the referring court is bound to observe scrupulously (judgment of 8 June 2023, Lyoness Europe, C‑455/21, EU:C:2023:455, paragraph 27). They are also recalled in paragraphs 13, 15 and 16 of the Recommendations of the Court of Justice of the European Union to national courts and tribunals in relation to the initiation of preliminary ruling proceedings (OJ 2019 C 380, p. 1).

73In the present case, as regards the third question, the order for reference does not meet the requirement laid down in Article 94(c) of the Rules of Procedure.

74It is clear that the order for reference does not set out sufficiently the reasons why the interpretation of the principle of the rule of law stemming from Article 2 TEU, the principle of legal certainty, the principle of sincere cooperation stemming from Article 4(3) TEU and the principle of good administration stemming from Article 41(1) of the Charter is necessary in the present case.

75The fact that the referring court relies on an alleged inconsistency between, on the one hand, the national provisions providing for the split payment mechanism and, on the other hand, the national provisions relating to insolvency is manifestly not sufficient to establish a link between the provisions and principles of EU law referred to in the preceding paragraph and that mechanism, which is at issue in the main proceedings.

76In those circumstances, the third question is inadmissible.

Costs

77Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Seventh Chamber) hereby rules:

Articles 273 and 395 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, and Council Implementing Decision (EU) 2019/310 of 18 February 2019 authorising Poland to introduce a special measure derogating from Article 226 of Directive 2006/112/EC on the common system of value added tax,

must be interpreted as not precluding national legislation which provides that the amount of value added tax (VAT) deposited on a separate VAT account, which a supplier has with a banking institution, may be used only for limited purposes, namely, in particular, the payment of the VAT due to the tax authority or the payment of VAT on invoices received from suppliers of goods or services.

Signatures

[Signatures]

( *1 ) Language of the case: Polish.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 11 April 2024 ¹

(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Combating of VAT fraud – Special measure – Split payment mechanism – VAT account belonging to the insolvent taxable person – Transfer of the funds held in the VAT account at the request of the insolvency administrator – Charter of Fundamental Rights of the European Union – Article 17(1) – Fundamental right to property – Article 51(1) – Implementation of EU law)

I. Introduction

1In 2019, Poland introduced a special ‘split payment’ mechanism (‘the special measure’) in order better to be able to combat value added tax (VAT) fraud. That mechanism provides, in connection with the supply of certain goods and services, that the price owed under civil law is to be paid into two different accounts. While the net price is to be paid into an ordinary account belonging to the taxable supplier of goods or services (‘the taxable person’), the VAT is to be transferred to a separate VAT account belonging to the taxable person, which can be used only to pay tax liabilities.

2The present request for a preliminary ruling concerns the effects of that special measure in the insolvency proceedings relating to the taxable person. May the tax authorities deny the insolvency administrator access to the funds held in the insolvent taxable person’s VAT account?

3The answer to that question would have to be no, if the special measure were already intrinsically incompatible with EU law, in particular the provisions of Directive 2006/112/EC on the common system of value added tax (‘the VAT Directive’). ² The refusal of access to the account would also be incompatible with EU law, however, if it disproportionately interfered with the taxable person’s fundamental right to property under Article 17(1) of the Charter of Fundamental Rights of the European Union (‘the Charter’). This in turn presupposes, however, that the special measure is an implementation of EU law within the meaning of Article 51(1) of the Charter.

4It further falls to be clarified whether EU law contains any rules on the ranking of claims to VAT in the insolvency proceedings relating to the taxable person. Priority access on the part of the State might follow from the fact that the VAT, which the taxable person collects from the consumer, is to be passed on first and foremost to the State and is not meant to benefit the taxable person’s other creditors.

II. Legal framework

A. European Union law

1. The VAT Directive

5Article 168(a) of the VAT Directive concerns the deduction of input tax and reads:

‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:

the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;’

6Article 206 of the VAT Directive concerns the payment of VAT:

‘Any taxable person liable for payment of VAT must pay the net amount of the VAT when submitting the VAT return provided for in Article 250. Member States may, however, set a different date for payment of that amount or may require interim payments to be made.’

7In accordance with Article 226 of the VAT Directive, invoices issued are required to contain only certain enumeratively listed details. An indication that the VAT is to be paid to a separate VAT account is not one of them.

8In accordance with the first paragraph of Article 273 of the VAT Directive, Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.

9Article 395(1) of the VAT Directive concerns the authorisation to introduce special measures:

‘The Council, acting unanimously on a proposal from the Commission, may authorise any Member State to introduce special measures for derogation from the provisions of this Directive, in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance.

Measures intended to simplify the procedure for collecting VAT may not, except to a negligible extent, affect the overall amount of the tax revenue of the Member State collected at the stage of final consumption.’

2. The European Insolvency Regulation

10Article 7 of Regulation (EU) 2015/848 on insolvency proceedings (‘the European Insolvency Regulation’) ³ governs the law applicable to insolvency proceedings and their effects:

‘1. Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened (the “State of the opening of proceedings”).

2. The law of the State of the opening of proceedings shall determine the conditions for the opening of those proceedings, their conduct and their closure. In particular, it shall determine the following:

…

the rules governing the distribution of proceeds from the realisation of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings by virtue of a right in rem or through a set-off;

…’

3. Implementing Decision 2019/310

11Recitals 1 and 3 to 5 of Implementing Decision (EU) 2019/310 authorising Poland to introduce a special measure derogating from Article 226 of Directive 2006/112 (‘Implementing Decision 2019/310’) ⁴ explain the background to the measure:

By letter registered with the Commission on 15 May 2018 Poland requested an authorisation to introduce a special measure derogating from Article 226 of [Directive 2006/112] in order to apply a split payment mechanism (“the special measure”). The special measure should require the inclusion of a special statement that [VAT] has to be paid to the blocked VAT account of the supplier on invoices issued in relation to the supplies of goods and services susceptible to fraud and generally covered by the reverse charge mechanism and by the joint and several liability in Poland. …

…

Poland has already taken numerous measures to fight fraud. It has introduced … the reverse charge mechanism and joint and several liability of the supplier and the customer, the Standard Audit File, tighter rules for the VAT registration and de-registration of taxable persons, increased number of audits among others. However, Poland nonetheless considers that those measures are insufficient to prevent VAT fraud.

Poland is of the view that the application of the special measure will eliminate VAT fraud. Since under the split payment mechanism the amount of VAT deposited on a separate VAT account of a supplier (taxable person) can be used for restricted purposes only, namely for the payment of the VAT liability to the tax authority or for the payment of VAT on invoices received from suppliers, it is better guaranteed that the tax authorities will receive the whole VAT amount which should be transferred by the taxable person to the Polish State Treasury.

Poland introduced the voluntary split payment mechanism on 1 July 2018. Poland considers that in areas particularly exposed to VAT fraud, the special measure should be introduced. Those areas are sectors of economy such as steel, scrap, electronics, gold, non-ferrous metals, fuels, and plastics. Those areas are generally covered by the reverse charge mechanism and by joint and several liability of the supplier and the customer in Poland.’

12Article 1 of Implementing Decision 2019/310 authorises the measure:

‘By way of derogation from Article 226 of [Directive 2006/112], Poland is authorised to introduce a special statement that VAT shall be paid to the separate and blocked VAT bank account of the supplier opened in Poland on invoices issued in relation to supplies between taxable persons of goods and services listed in the Annex to this Decision where payments for supplies are made by electronic bank transfers.’

B. Polish law

1. The Law on VAT

13Article 106e(1)(18a) of the Ustawa z dnia 11 marca 2004 r. o podatku od towarów i usług (Law of 11 March 2004 on the tax on goods and services; ‘Law on VAT’) provides that, in the case of invoices on which the total amount due exceeds 15000 Polish zlotys (PLN) or the equivalent of that amount in a foreign currency and which cover the supply to a taxable person of goods or services listed in Annex No 15 to that law, the invoices must contain the expression ‘split payment mechanism’.

14In accordance with Article 108a(1) of the Law on VAT, taxable persons who have received an invoice showing the amount of tax may apply the split payment mechanism when paying the amount due arising from that invoice. Article 108a(1a) of the Law on VAT provides that, when making payments for purchased goods or services listed in Annex No 15 to that law and evidenced by an invoice on which the total amount due exceeds PLN 15000 or the equivalent of that amount in a foreign currency, taxable persons are required to apply the split payment mechanism.

15On request by the taxable person, the director of the tax office must grant consent for the funds to be transferred to an account designated by the taxable person, in accordance with Article 108b(1) of the Law on VAT, or, in accordance with Article 108b(5)(1) of that law, must refuse to grant such consent by means of a decision to that effect, if the taxable person is in arrears with the payment of certain taxes or duties.

2. Law on banking

16In accordance with Article 62b(2)(2)(a) of the Law on banking, the VAT account may be debited exclusively in order to make certain payments into the account of the tax office, in settlement of, inter alia, VAT, corporation tax, income tax, excise duties and customs duties.

III. Facts and the request for a preliminary ruling

17The special measure introduced by Poland covers the supply of certain goods or services which are paid for by electronic bank transfer. In that regard, the taxable person must have a separate, blocked VAT account opened in Poland. That VAT account is reserved for the collection of the VAT paid by the taxable person’s customers, for the payment of VAT to those who supply goods or services to the taxable person and for the settlement of other duties owed to the State Treasury under public law.

18The recipient of the supply pays the net price into the taxable person’s ordinary bank account, but transfers the VAT payable on the supply of goods or services to the taxable person’s VAT account.

19On 28 June 2021, the insolvency administrator of the taxable person against whom insolvency proceedings had been opened on 30 January 2019 applied to the first-tier tax authority to have the funds held in the taxable person’s VAT account transferred to the account of the insolvency estate.

20The first-tier tax authority refused to give its consent. It stated that, at the time of the notice of insolvency, the taxable person had arrears of both VAT and income tax that were greater than the amount which the insolvency administrator was asking to be transferred.

21An appeal brought by the insolvency administrator against that refusal was unsuccessful. The appellate authority upheld the decision of the first-tier tax authority and shared the view expressed there. The insolvency administrator brought an action against the latter decision.

22The Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative Court, Wrocław, Poland), which has jurisdiction over the aforementioned action, has decided to stay the proceedings and refer the following three questions to the Court of Justice for a preliminary ruling under Article 267 TFEU:

Must the provisions of [Implementing Decision 2019/310] [and] the provisions of [the VAT Directive], in particular Articles 395 and 273 thereof, as well as the principle of proportionality and the principle of neutrality, be interpreted as precluding national legislation and practice which, in the circumstances of the case at hand, preclude the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism) to a bank account which has been designated by that [administrator]?

Must Article 17(1) of the [Charter] – [concerning the] right to property – in conjunction with Article 51(1) and Article 52(1) thereof, be interpreted as precluding national legislation and practice which, in the circumstances of the case at hand, by precluding the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism), consequently result in the funds owned by the insolvent taxable person in that VAT account being frozen, and thus make it impossible for the insolvency administrator to carry out his or her duties in the course of the insolvency proceedings?

Having regard to the context and objectives of [Implementing] Decision 2019/310, as well as the provisions of [the VAT Directive], must the principle of the rule of law stemming from Article 2 [TEU] and the principle of legal certainty which implements it, the principle of sincere cooperation stemming from Article 4(3) TEU, and the principle of good administration stemming from Article 41(1) of the Charter, be interpreted as precluding national practice which, by precluding the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism), seeks to frustrate the objectives of the insolvency proceedings defined by an insolvency court as falling within Polish jurisdiction for the purposes of Article 3(1) of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings … (OJ 2015 L 141, p. 19), and consequently leads to a situation as a result of which, through the application of an inappropriate national measure, the State Treasury is treated preferentially as a creditor at the expense of the general body of creditors?’

23Written observations in the proceedings before the Court of Justice were lodged by the Dyrektor Izby Administracji Skarbowej we Wrocławiu (Director of the Tax Chamber, Wrocław, Poland), the Rzecznik Małych i Średnich Przedsiębiorców (Ombudsman for Small and Medium-sized Enterprises, Poland), Poland and the European Commission. The Court refrained from holding a hearing, in accordance with Article 76(2) of the Rules of Procedure.

IV. Legal assessment

24By the three questions which it has referred for a preliminary ruling, the referring court wishes to ascertain, in essence, whether EU law precludes national legislation and practice whereby the insolvency administrator is denied access to the funds held in the taxable person’s VAT account, in so far as the taxable person has tax arrears. In its request for a preliminary ruling, the referring court expresses fundamental doubts as to the compatibility of the special measure with the VAT Directive, Implementing Decision 2019/310, the Charter and the general principles of EU law.

25I shall therefore start by looking at whether and, if so, to what extent the configuration of the special measure is compatible with the VAT Directive (A). Next, I shall examine whether the refusal to grant access to the VAT account in the course of the insolvency proceedings relating to the taxable person is in conformity with EU law (B).

A. The compatibility of the special measure with the VAT Directive

26The referring court has doubts about the compatibility of the special measure with the VAT Directive, in particular in the light of Articles 395 and 273 thereof (1). It is also important to examine its compatibility with Article 206 in conjunction with Article 168(a) of the VAT Directive (2).

1. Legal basis: Article 395(1) of the VAT Directive

27Article 1 of Implementing Decision 2019/310 authorises Poland to introduce a special statement to the effect that, in certain cases, VAT is to be paid into a separate and blocked VAT account. Since, according to Article 1 of that implementing decision, that authorisation is a derogation from Article 226 of the VAT Directive, that ‘special statement’ is to be understood as a specific invoicing instruction in connection with the supply of certain goods or services. Invoices must also mention that, by way of derogation from Article 226 of the VAT Directive, the recipient of the supply is to pay the VAT into a separate VAT account belonging to the taxable person.

28The Council based that authorisation to introduce a special measure in particular on Article 395(1) of the VAT Directive. That provision states that the Council, acting unanimously on a proposal from the Commission, may authorise any Member State to introduce special measures in derogation from the VAT Directive in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance. As is clear in particular from the recitals of Implementing Decision 2019/310, the introduction of the special measure is intended to prevent VAT fraud.

29Since the conditions of Article 395(1) of the VAT Directive are thus met, the present case does not hang on the compatibility of the special measure with Article 273 of that directive, notwithstanding the question to that effect raised by the referring court. Article 395(1) of the VAT Directive is, at least so far as the special measure is concerned, the more specific legal basis.

30It is also doubtful whether Article 273 of the VAT Directive would be a suitable legal basis for the introduction of the special measure. In contrast to Article 395(1) of that directive, which permits measures aimed (alternatively) at simplifying the procedure for collecting VAT or at preventing certain forms of tax evasion or avoidance, Article 273 of the VAT Directive makes it possible only to impose additional obligations aimed (cumulatively) at ensuring the correct collection of VAT and at preventing evasion. In the present case, the special measure, however, is intended not to ensure the correct collection of VAT but only to prevent tax evasion (and tax losses). What is more, the special measure is not an additional obligation but rather a derogation from the VAT Directive. Derogations, however, are permissible only on the basis of Article 395 of that directive.

2. Compatibility with Article 206 in conjunction with Article 168(a) of the VAT Directive

31The special measure would, however, also have to be compatible with the other provisions of the VAT Directive. Unlike Italy, ⁵ for example, Poland applied for a derogation only from Article 226 of the VAT Directive, and received it by way of Implementing Decision 2019/310.

32What we may have here, at first glance, is an infringement of Article 206 in conjunction with Article 168(a) of the VAT Directive. After all, Article 206 of the VAT Directive provides that taxable persons are liable for payment only of the VAT arising from their transactions that becomes chargeable on submission of a VAT return at the end of a particular taxation period (see Article 250 et seq. of the VAT Directive) and after deduction of the input VAT which they have themselves paid to other taxable persons. In principle, therefore, VAT is payable not after each completed taxable transaction but only after the end of the relevant taxation period. ⁶ The Polish scheme, however, prevents taxable persons from freely disposing of that amount from the moment they receive payment from their customer.

33What is more, Article 206 of the VAT Directive is closely linked to the right to deduct input VAT provided for in Article 168(a) of the VAT Directive. It is settled case-law that the right of taxable persons, as expressed in that provision, to deduct immediately the VAT due or already paid on goods purchased and services received as inputs from the VAT which they are liable to pay is a fundamental principle of the common system of VAT established by EU legislation. ⁷ The pre-financing of VAT not actually intended to burden the taxable trader must therefore be kept to a minimum. ⁸

34The Polish special measure is nonetheless compatible with those provisions. Although taxable persons cannot freely dispose of the VAT account, they can at least use it to pay VAT to those supplying goods or services to them. What is more, it appears that that account may be used to discharge all liabilities to the State.

35Therefore, in so far as taxable persons can pay VAT to those supplying goods or services to them using the funds held in the VAT account, they do not have to pre-finance VAT to any greater extent than is provided for under the normal system established by the VAT Directive. In those circumstances, the special measure does not infringe Article 206 of the VAT Directive.

36The position as regards Article 168(a) of the VAT Directive may be otherwise, however, if the sum of the funds held in the VAT account exceeds the amount of the tax debt. If, in those circumstances, taxable persons are unable to dispose of the funds in the VAT account in a timely manner, they are deprived of liquidity for no reason under tax law. While the surplus amount must therefore be promptly released to the taxable person, the tax authority must still be able to verify the accuracy of the declared tax liability, at least if it has any specific doubts in that regard. ⁹ It is for the national court to review whether those requirements are met. Such a scenario does not appear to be present here, however, since, according to the information provided by the referring court, the taxable person appears to have outstanding tax arrears. Even so, the referring court will ultimately have to examine this too.

37It is true that the taxable person’s right to dispose of the VAT collected is thus restricted. However, it cannot (yet) be said that the taxable person must pay the tax at an earlier point in time than as provided for in Article 206 of the VAT Directive. In most typical cases, the restricted right of disposal is confined to the difference between the taxable person’s own tax liability and the input tax deduction plus the aforementioned duties under public law. From a temporal point of view, the right of disposal is limited only until the time of the next tax return. What is more, the second sentence of Article 206 of the VAT Directive would even allow a Member State to derogate from the rule that payment must be made when the VAT return is submitted and to demand interim payment, in the case of VAT which has already become chargeable. ¹⁰

38Consequently, there is no derogation from Article 206 of the VAT Directive. We may therefore leave open the question whether only minor derogations from individual provisions of the VAT Directive would (by implication) be permitted in the very formal procedure under Article 395 of the VAT Directive, even though those provisions are not mentioned in the implementing decision.

B. Compatibility with EU law of not releasing the VAT account in the event of insolvency

39It must further be clarified whether it is compatible with EU law for national tax authorities to deny the insolvency administrator of an insolvent taxable person access to the VAT account.

40It therefore falls to be examined whether the European Insolvency Regulation or the VAT Directive precludes the prioritisation of (VAT) claims in insolvency proceedings (1) or whether the grant of unrestricted access to the VAT account is required under Article 17(1) of the Charter (2) or follows from other principles of EU law (3).

1. The ranking of (VAT) claims in insolvency proceedings

41EU law does not lay down any material rules of its own as regards the order in which creditors are to be satisfied in insolvency proceedings. It provides only conflict-of-law rules for this purpose. Thus, in accordance with Article 7(1) and (2)(i) of the European Insolvency Regulation, it is the law of the State of the opening of proceedings that is to govern, inter alia, the distribution of proceeds from the realisation of assets and the ranking of claims. If, therefore, insolvency proceedings are opened in Poland, it is Polish law, as the applicable insolvency law, that determines, inter alia, the ranking of claims.

42The VAT Directive, too, certainly does not preclude the prioritisation of claims to tax in insolvency proceedings relating to a taxable person. On the contrary, the special features of VAT law may even require that the VAT collected by the insolvent taxable person is to be paid first and foremost to the State and is not to be used to satisfy all of the taxable person’s other creditors.

43In the view of the Director of the Tax Chamber, Wrocław, this can be inferred from the judgment of 15 October 2020, E. (VAT – Reduction of the taxable amount) (C‑335/19, EU:C:2020:829). In that judgment, the Court held that the primacy of EU law can also render inapplicable the order in which creditors are satisfied under insolvency law, if this is not in accordance with the provisions of the VAT Directive. ¹¹

44The aforementioned dispute, however, had to do with the direct effect of Article 90 of the VAT Directive for the benefit of the taxable person, who should not bear the risk that his debtor, the recipient of the supply, may become insolvent. By contrast, the present case concerns the impact of the taxable person’s insolvency on the separate and blocked VAT account. The aforementioned judgment does not support any direct inference in that regard.

45What does militate in favour of the priority satisfaction of the State’s claims to VAT in the event of the insolvency of the taxable person is the special function which the VAT system assigns to the now insolvent taxable supplier.

46It is settled case-law of the Court that VAT is an indirect tax on consumption which is to be borne by the final consumer. ¹² In that regard, the taxable undertaking acts – as the Court puts it – only as ‘tax collectors for the State and in the interest of the public exchequer’. ¹³ The tax liability of the taxable undertaking therefore performs a purely technical function that arises exclusively from the indirect way in which VAT is collected. From a material point of view, VAT, as a general tax on consumption, is intended to tax not the taxable undertaking but the financial capacity of consumers as reflected in their expenditure of assets to obtain a consumable benefit. ¹⁴

47Where, however, taxable persons act only as ‘tax collectors for the State and in the interest of the public exchequer’, it seems contradictory to allow all of their creditors free access to the sums so collected. In that context, taxable persons act, rather, as a kind of trustee. They (only) collect the tax for, and pass it on to, the State. As soon as VAT is paid (as part of the price), all of the parties involved – that is to say, the taxable person (including the insolvency administrator), his creditors and the payer – know that that amount is not materially owed to the taxable person but is to be passed on to the State (indirect collection of tax), even though it is first (formally) paid into an account belonging to the taxable person.

48It should also be noted that the indirect taxation method provided for under the VAT Directive is departed from at certain points. In particular, shifting the tax liability to the recipient of the supply (see Articles 196 and 199 of the VAT Directive) leads to the direct taxation of the expenditure incurred by the recipient of the supply. The VAT due on the transaction is not available to the taxable person’s creditors in the case of such a reverse-charge mechanism either, because it is already owed by the recipient of the supply, who pays it to the State and does not therefore pay it first to the supplier. As is clear in particular from recital 5 of Implementing Decision 2019/310, however, the special measure was specifically introduced for transactions which, because of their susceptibility to fraud, were already subject to the reverse-charge mechanism. Even without the special measure, therefore, that VAT would apparently not have been available to the insolvency estate either.

49To my mind, however, the (formal) taxation method can have no bearing on the material question as to whether the VAT is to be paid to the State for which it was collected or is also available to the taxable person’s creditors to satisfy their claims.

50Consequently, EU law does not preclude national legislation and practice which ultimately have the effect, in insolvency proceedings, of prioritising the satisfaction of the creditor of tax liabilities over the creditors of other claims.

2. Compatibility with Article 17(1) of the Charter

51The refusal by the tax authorities to release the funds held in the VAT account could, however, constitute a breach of the taxable person’s (account holder’s) right to property guaranteed in Article 17(1) of the Charter.

(a) Scope of the Charter under Article 51(1) of the Charter

52For that to be the case, the special measure would in the first place have to constitute an implementation of EU law in accordance with Article 51(1) of the Charter.

53In the Commission’s view, this is not the case, since neither the VAT Directive nor the European Insolvency Regulation govern the ranking of claims in insolvency proceedings. According to the Commission, the fact that Implementing Decision 2019/310 authorises Poland to introduce the split payment mechanism is not sufficient to support the assertion that this is an implementation of EU law. That line of argument, however, is unconvincing.

54In accordance with settled case-law, the concept of ‘implementing Union law’ within the meaning of Article 51(1) of the Charter presupposes a sufficient degree of connection between an act of EU law and the national measure. The fact that the matters in question are closely related or that one may have an indirect effect on the other is not sufficient. ¹⁵ Fundamental EU rights are not applicable to national legislation where the provisions of EU law do not impose any specific obligations on Member States with regard to the situation at issue in the main proceedings. ¹⁶

55Although the special measure constitutes a derogation from the provisions of the VAT Directive, it is nonetheless an implementation of EU law within the meaning of Article 51(1) of the Charter. After all, it is EU law alone, namely Article 395(1) of the VAT Directive in conjunction with Implementing Decision 2019/310, which enables Poland to introduce the special measure derogating from the VAT Directive in the first place. That special measure thus continues to give practical expression to the provisions of the VAT Directive for Poland, but in a way which derogates from that in which those provisions are put into effect by the other Member States.

56If, however, the implementation of the VAT Directive entails a commitment to the fundamental rights of the European Union, this must also be the case where individual Member States are authorised by the European Union to introduce selectively derogating special measures under Article 395(1) of the VAT Directive, and go on to implement them.

57What is more, the special measure is intended to combat VAT fraud, in accordance with the requirement laid down in Article 395(1) of the VAT Directive. ¹⁷ That objective is recognised and promoted by the provisions of EU law on the common system of VAT. ¹⁸ For this reason too, the application of the special measure constitutes an implementation of EU law.

58In addition, the special measure is apparently also intended to fulfil the obligation, imposed on Member States by Article 325(1) TFEU, to effectively counter activities affecting the financial interests of the European Union. The Court of Justice has, after all, stated ¹⁹ that, in the light of the own resources decision, ²⁰ there is a direct link between the collection of VAT revenue, in compliance with the applicable EU law, and the availability to the EU budget of the corresponding VAT resources, since any lacuna in the collection of the first potentially causes a reduction in the second. As much as that assertion may be open to question, ²¹ it must nonetheless ultimately be concluded that the special measure constitutes an implementation of EU law within the meaning of Article 51 of the Charter, that is to say, an implementation of the VAT Directive.

59The special measure must therefore be measured against Article 17(1) of the Charter.

(b) Interference with Article 17(1) of the Charter and the justification therefor

60Article 17(1) of the Charter protects all rights with an asset value that create, under the legal system concerned, an established legal position enabling the holder to exercise those rights autonomously and for his or her own benefit. ²² Available money constitutes such a legal position with an asset value. ²³ The first sentence of Article 17(1) of the Charter also protects the use and disposal of lawfully acquired property.

61A measure which provides that VAT must be paid into a separate VAT account of the taxable person, the use of which is restricted, therefore interferes with the scope of the protection provided for under Article 17(1) of the Charter. This is because the taxable person cannot freely dispose of the funds held in the VAT account. As I understand the Polish legislation, the taxable person can use the VAT account only for certain enumeratively listed payments. In accordance with Article 108b(1) of the Law on VAT, the taxable person must seek the tax authority’s consent to access the account for any other purpose.

62It follows from the third sentence of Article 17(1) of the Charter, however, that the use of property may be regulated by law in so far as that is necessary for the general interest. What is more, in accordance with Article 52(1) of the Charter, limitations may be placed on the exercise of the rights and freedoms enshrined therein, on condition that those limitations are not disproportionate. ²⁴

63The special measure pursues a legitimate purpose, namely the combating of VAT fraud. ²⁵ It is also not obviously unsuitable for attaining that objective. After all, it transforms a system of indirect tax collection that is susceptible to fraud into a semi-indirect system of tax collection which is less susceptible to fraud and under which the VAT collected is paid neither directly to the State nor indirectly to the State via another taxable person, but into a form of trust account belonging to the taxable person.

64It must not, however, go beyond what is necessary to achieve the purpose which it pursues. The only more lenient yet equally suitable means conceivable are other anti-fraud measures. It is important to take into account the discretion which the legislature of the Member State concerned enjoys in that regard. The Court of Justice has nothing before it to indicate that the limits of that discretion have been breached here. It would appear that other anti-fraud measures have not been sufficiently successful. ²⁶

65Finally, the measure should be appropriate. It is true that the risk of VAT fraud may be lower in an insolvency administration than in the normal course of business. It cannot be ruled out entirely, however. What is more, the assets held in the VAT account are used to settle the taxable person’s tax liabilities and are thus not removed from him. There is only a temporary restriction of the right to dispose of the VAT, which, from a material point of view, is in any event owed to the State alone.

66It might at most be said that the other insolvency creditors are deprived of the assets to satisfy their claims because the State is effectively given priority over them. However, on the one hand, the request for a preliminary ruling does not relate to the fundamental rights of the other insolvency creditors. On the other hand, in so far as the VAT is collected only ‘in trust’, it is difficult to establish on the part of the other creditors a right with an asset value to the surrender of the VAT, which is actually owed to the State.

67Moreover, EU law does not govern the ranking of claims in insolvency proceedings. If national law confers on the exchequer a preferential right to non-harmonised taxes in insolvency proceedings, there is certainly no implementation of EU law. EU fundamental rights are therefore not to be examined in this regard.

68Consequently, it is not incompatible with EU law for national law to require tax authorities, even after insolvency proceedings have been opened against a taxable person, to examine whether there are tax arrears, and to release sums held in the VAT account only in so far as that is not the case. This is certainly true where the examination and release of funds that are not needed to satisfy tax arrears take place within a reasonable period of time.

69Consequently, although the special measure constitutes an interference with Article 17(1) of the Charter, it is justified.

3. Breach of other principles of EU law

70There is nothing to indicate the presence of a breach of the principles of the rule of law and legal certainty provided for in Article 2 TEU (to which the referring court also refers). The tax authority’s decision contained a statement of reasons and was based, according to the referring court, on Polish law and its interpretation by the Polish courts. It was also open to appeal.

71The right to good administration reflects a general principle of EU law. The requirements to which that right gives rise also apply to national tax authorities in the implementation of EU law. ²⁷ There is, however, no evidence of a breach of that principle here. Finally, there is nothing to indicate the presence of a breach of the principle of sincere cooperation under Article 4(3) TEU either.

V. Conclusion

Conclusion

72I therefore propose that the Court’s answer to the questions referred should be as follows:

Article 17(1) of the Charter of Fundamental Rights of the European Union, the principles of proportionality, neutrality, the rule of law, legal certainty, sincere cooperation and good administration, as well as the provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in particular Articles 395 and 206 thereof, and of Council Implementing Decision (EU) 2019/310 of 18 February 2019 authorising Poland to introduce a special measure derogating from Article 226 of Directive 2006/112, do not preclude national legislation and practice whereby the insolvency administrator is denied permission to transfer the funds held in the VAT account belonging to the taxable person to the bank account designated by the insolvency administrator, in so far as the taxable person still has tax arrears.

¹ Original language: German.

² Council Directive of 28 November 2006 (OJ 2006 L 347, p. 1).

³ Regulation of the European Parliament and of the Council of 20 May 2015 (OJ 2015 L 141, p. 19).

⁴ Council Implementing Decision of 18 February 2019 (OJ 2019 L 51, p. 19).

⁵ See Council Implementing Decision (EU) 2017/784 of 25 April 2017 authorising the Italian Republic to apply a special measure derogating from Articles 206 and 226 of Directive 2006/112 and repealing Implementing Decision (EU) 2015/1401 (OJ 2017 L 118, p. 17).

⁶ See also Opinion of Advocate General Saugmandsgaard Øe in Dyrektor Izby Administracji Skarbowej w Bydgoszczy(Intra-Community acquisitions of diesel) (C‑855/19, EU:C:2021:222, points 111 and 114).

⁷ Judgment of 14 October 2021, Finanzamt N and Finanzamt G(Communication of the allocation decision) (C‑45/20 and C‑46/20, EU:C:2021:852, paragraph 31 and the case-law cited).

⁸ See my Opinion in AGROBET CZ (C‑446/18, EU:C:2019:1137, point 64).

⁹ See, to that effect, my Opinion in AGROBET CZ (C‑446/18, EU:C:2019:1137, point 52).

¹⁰ See judgment of 9 September 2021, Dyrektor Izby Administracji Skarbowej w Bydgoszczy(Intra-Community acquisitions of diesel) (C‑855/19, EU:C:2021:714, paragraph 32).

¹¹ Judgment of 15 October 2020, E. (VAT – Reduction of the taxable amount) (C‑335/19, EU:C:2020:829, paragraph 51 et seq.).

¹² Judgments of 7 November 2013, Tulică and Plavoşin (C‑249/12 and C‑250/12, EU:C:2013:722, paragraph 34), and of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400, paragraph 19), and order of 9 December 2011, Connoisseur Belgium (C‑69/11, not published, EU:C:2011:825, paragraph 21); see also my Opinion in E. (VAT – Reduction of the taxable amount) (C‑335/19, EU:C:2020:424, point 23 et seq.).

¹³ Judgments of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 21), and of 20 October 1993, Balocchi (C‑10/92, EU:C:1993:846, paragraph 25).

¹⁴ See, by way of example, judgments of 3 March 2020, Vodafone Magyarország (C‑75/18, EU:C:2020:139, paragraph 62); of 11 October 2007, KÖGÁZ and Others (C‑283/06 and C‑312/06, EU:C:2007:598, paragraph 37 – ‘it is proportional to the price charged by the taxable person in return for the goods and services which he has supplied’); and of 18 December 1997, Landboden-Agrardienste (C‑384/95, EU:C:1997:627, paragraphs 20 and 23).

¹⁵ Judgment of 22 April 2021, Profi Credit Slovakia (C‑485/19, EU:C:2021:313, paragraph 37 and the case-law cited); see also my Opinion in Direktor na Direktsia Obzhalvane i danachno-osiguritelna praktika (C‑1/21, EU:C:2022:435, point 66).

¹⁶ Judgment of 16 July 2020, Adusbef and Others (C‑686/18, EU:C:2020:567, paragraph 53 and the case-law cited).

¹⁷ See my comments in point 28 above.

¹⁸ See judgments of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 50); of 14 May 2020, Agrobet CZ (C‑446/18, EU:C:2020:369, paragraph 41); and of 20 May 2021, ALTI (C‑4/20, EU:C:2021:397, paragraph 35); see also my Opinion in AGROBET CZ (C‑446/18, EU:C:2019:1137, point 67).

¹⁹ Judgments of 5 December 2017, M.A.S. and M.B. (C‑42/17, EU:C:2017:936, paragraph 31); of 7 April 2016, Degano Trasporti (C‑546/14, EU:C:2016:206, paragraph 22); and of 26 February 2013, Åkerberg Fransson (C‑617/10, EU:C:2013:105, paragraph 26 and the case-law cited).

²⁰ Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources (OJ 2007 L 163, p. 17).

²¹ On the financial consequences for the EU budget of extending an exemption from VAT, the Commission has stated: ‘By extending the scope of VAT exemptions, the proposal could reduce VAT revenue collected by Member States and therefore the VAT own resource. While there will be no negative implications for the EU budget, as the own resource based on gross national income (GNI) compensates for any expenditure not covered by traditional own resources and the VAT own resource, the non-collected VAT own resources from certain Member States would have to be compensated by all Member States through the GNI own resource’ (Commission’s Proposal for a Council Directive of 24 April 2019 amending Directive 2006/112 and Directive 2008/118/EC concerning the general arrangements for excise duty as regards defence effort within the Union framework (COM(2019) 192 final), p. 8 – EN version; emphasis added). This contradicts the existence of a direct link between the collection of VAT revenue and the availability to the EU budget of the corresponding VAT resources.

²² Judgments of 21 May 2019, Commission v Hungary(Usufruct over agricultural land) (C‑235/17, EU:C:2019:432, paragraph 69), and of 22 January 2013, Sky Österreich (C‑283/11, EU:C:2013:28, paragraph 34); see also my Opinion in MAX7 Design (C‑519/22, EU:C:2023:998, point 40).

²³ See my Opinion in MAX7 Design (C‑519/22, EU:C:2023:998, point 40).

²⁴ Judgment of 14 January 2021, Okrazhna prokuratura – Haskovo and Apelativna prokuratura – Plovdiv (C‑393/19, EU:C:2021:8, paragraph 53 and the case-law cited).

²⁵ See my comments in points 28 and 57 above.

²⁶ See recital 3 of Implementing Decision 2019/310.

²⁷ See, to that effect, judgments of 13 July 2023, Napfény-Toll (C‑615/21, EU:C:2023:573, paragraph 53), and of 21 October 2021, CHEP Equipment Pooling (C‑396/20, EU:C:2021:867, paragraph 48 and the case-law cited).